E-mails Show City’s Tricky Math in Yankee Stadium Deal

December 17, 2008

As Juan Gonzalez first reported in this morning’s Daily News, Assemblymember Richard Brodsky has obtained more e-mails between city officials on the Yankees’ stadium project — and they’re doozies.

The latest e-mails, Brodsky told Gonzalez, are “the smoking gun” on how the city ended up with two different land values for the site of the Yankees’ new stadium:

“The professionals did their job. The political appointees then ordered them to change the assessment — and they did.”

For those who haven’t kept up with the story so far, a quick recap. For the past few months, Brodsky has been pounding away at the question of how exactly city assessors managed to come up with two different valuations for the land — formerly Macombs Dam Park — that the city handed over to the Yankees for their new stadium, telling the IRS it was worth more than $200 million, while telling the state it was a mere $21 million.

This wasn’t just a matter of sloppy paperwork: If the IRS figure had been any lower, the Yanks’ convoluted plan for getting tax-free bonds (involving setting property tax levels high enough that the team’s private bond payments could be recast as public “payments in lieu of property taxes,” or PILOTS) would have fallen apart; if the state figure were any higher, it would have been illegal to eliminate Macombs Dam Park without providing more new parkland to replace it.

There’s more background here, but you get the idea — the city had to rationalize two very different land value figures to make the Stadium deal work.

What the latest e-mails show, however, is a very different scene unfolding back in March 2006.

On March 10, it turns out — two weeks before Stark was describing pressure to supply a figure ASAP — her assessor Maurice Kellman had in fact provided a land value for the Macombs Dam site: $26.8 million, not nearly enough to allow for the team’s planned tax-free bond scheme. This figure, Kellman explained in a memo titled “Estimated Market Value for Proposed Yankee Stadium,” was based on land values in the Bronx that were “growing by leaps and bounds” and had now reached $32.50 a square foot.

Twelve days later, Kellman submitted a revised memo to his boss, assistant commissioner Dara Ottley-Brown, along with the terse note, “Here is the write-up with the changes you requested earlier today.”

The new land value figure: $204 million. A new paragraph in the memo explained that this was based on land sales not in the South Bronx, but in Harlem, where “land sales north of 100 Street in Manhattan range from $200 to $323 per square foot.” The “major revitalization” of Harlem over the past five years “has also spread across the river to the South Bronx,” Kellman’s memo now asserted, without explanation of why it concluded that Manhattan sale prices were considered a better means of valuing Bronx land than Bronx sale prices.

So, were the “changes requested” to goose the numbers to fit the Yanks’ bond scheme? There’s nothing in the e-mail trail from March 2006 that proves it, but other e-mails provide circumstantial evidence:

On December 22, 2005, Michael Kalt from the mayor’s office — since moved on to become stadium czar for the Tampa Bay Rays — e-mailed Robert LaPalme and Steve Berzin of the city Industrial Development Agency: “I don’t want to get into this much further on e-mail, but we have to take into consideration that the AV [assessed value] is only so high because we’re choosing a methodology to support the tax-exempt financing.”

The previous month, LaPalme had e-mailed Kalt asking if it was okay to “development schedules for the maximum PILOT payments” — the keys to the Yanks’ tax-free bond dodge — and noted that “I know that you folks had one meeting with [Department of Finance] to discuss assessment methodology.”

This past July, mayoral press aide Andrew Brent e-mailed a proposed statement to others in City Hall that concluded that the $204 million appraisal had been “made at the urging of EDC to satisfy the underwriters of the tax-exempt bonds that were to be used to finance the stadiums.” Finance Department press officer Owen Stone e-mailed back, “I think you should skip that last sentence” about satisfying the underwriters, and suggested a more neutral replacement.

So what happens if it turns out the city cooked the books? Kucinich’s subcommittee staffers say the IRS could conduct an audit; if it turns out there were “material misrepresentations” by the city, the bonds could be stripped of their tax-exempt status. (An IRS spokesperson said he’d have to get back to us on this.) And if nothing else, this should make for some fireworks when the IDA considers the Yanks’ request for $259 million in new tax-exempt bonds — now slated for a public hearing on January 15 at 10 am at 110 William Street.